In the last 15 years or so, tremendous efforts and progress have been made in valuing interest rate sensitive derivative securities. Broadly speaking, two different approaches have been used. Some authors have modeled interest rates in an equilibrium setting and derived bond prices and other interes
Computationally simple lattice methods for option and bond pricing
✍ Scribed by Costabile, Massimo ;Leccadito, Arturo ;Massabó, Ivar
- Publisher
- Springer
- Year
- 2009
- Weight
- 464 KB
- Volume
- 32
- Category
- Article
- ISSN
- 1127-1035
No coin nor oath required. For personal study only.
📜 SIMILAR VOLUMES
## Abstract For derivative securities that must be valued by numerical techniques, the trade‐off between accuracy and computation time can be a severe limitation. For standard lattice methods, improvements are achievable by modifying the underlying structure of these lattices; however, convergence
American option for interest rate caps and coupon bonds are analyzed in the formalism of quantum finance. Calendar time and future time are discretized to yield a lattice field theory of interest rates that provides an efficient numerical algorithm for evaluating the price of American options. The a